Vital Signs for the Week of May 16


The "soft patch" is becoming a fading memory, and investors will be watching this week's economic data for signs that affirm its demise. Surprisingly positive April reports on job growth and retail sales, along with news of a sharp narrowing in the March trade deficit, strongly suggest an upward revision to the Commerce Dept.'s 3.1% advance estimate of first-quarter economic growth into the 3.5%-to-4% range. And second-quarter growth appears off to a good start, with a good shot at breaking the 4% mark.

In the coming week, there will be intense attention on price indexes given the recent signs that the economy is reaccelerating. Gasoline prices, which jumped 7.2% in April to an average of $2.21, from $2.06 in March, will dominate the overall increases. However, economists expect more moderate advances in the core indexes, which exclude energy and food.

Another key trend that market watchers will be eyeing is the extent to which the latest numbers on industrial prooduction and housing starts follow the trend of other April data: a strong rebound for the month after a weak March showing. The trend so far tends to confirm the notion that much of the March data were distorted negatively by a combination of weather influences and an earlier-than-usual Easter. That's especially true for housing starts, which had plunged more than 17% in March.

This week also offers some early-bird readings on economic activity in May. Look for the May survey of homebuilders for how builders assess the current housing market. And the Philadelphia Federal Reserve Bank offers its May survey of business activity in the Philly Fed region, often a benchmark for other regional and national surveys. Moreover, toward the end of the week, three Federal Reserve Board governors will be on the speakers circuit.

Here's a full accounting of the week's upcoming data and events:

EARNINGS REPORTS

Monday, May 16

Agilent Technologies, Limited Brands, Lowe's Companies, and more.

EMPIRE STATE MANUFACTURING SURVEY

Monday, May 16, 8:30 a.m. EDT

The New York Federal Reserve Bank will release its latest survey of business conditions for manufacturers in the New York Fed district. According to the median forecast of economists surveyed by Action Economics, the May manufacturing activity index probably bounced back to 11.0. The April reading tumbled to 3.1, from 20.2 in March and 19.2 in February.

The new orders series turned negative for the first time since April of 2003, falling to -0.2, from 8.6 in March, and 17.3 in February. A negative reading indicates that more respondents than not reported a fall in orders during the month. The shipments index plunged to 0, from 21.9, indicating no change in shipment levels from the previous month. The April report also showed a fall in the unfilled orders index for the second straight month but a resilient employment index level of 8.6, from 11.3 in March.

Respondents to the regional survey remained fairly optimistic about the coming six months with an expectations index reading of 36.8. However, the average level over the life of this report -- the index began in July of 2001 -- is 51.3. The new orders eased to 33.8, from 44.3 in March, and 39.9 in February.

HOME BUILDERS SURVEY

Monday, May 16, 1 p.m. EDT

The National Association of Home Builders and Wells Fargo bank issue the monthly survey results for May. The report updates housing market conditions by measuring builders' assessments of current sales, buyer traffic through model homes, and expected demand. For April, the activity index slipped to 67, after an upwardly revised reading of 70 in March, and a February reading of 69. The April number was the lowest since last September. The index has bounced between readings of 67 and 71 over the past 14 months, reflecting a resilient housing market.

The index tracking single-family home sales slipped to 73 in April, from 76 in both March and February. Expectations for sales in the coming six months fell to 76, from readings of 79 in the previous two months. The index for prospective buyer traffic slipped down to 50, after rising to 52 in March, from 50 in February.

EARNINGS REPORTS

Tuesday, May 17

Applied Materials, Big Lots, Deere & Co., Hewlett-Packard, Home Depot, JC Penney, Nordstrom, Staples, TJX Companies, and more.

ICSC-UBS STORE SALES

Tuesday, May 17, 7:45 a.m. EDT

This weekly tracking of retail sales, compiled by the International Council of Shopping Centers and UBS bank, will update buying activity for the week ending May 14. In the week ended May 7, sales rose 0.7%, after growing 0.5% in the week ended Apr. 30, and slipping 0.3% in the previous week.

INSTINET REDBOOK RESEARCH STORE SALES

Tuesday, May 17, 8:55 a.m. EDT

This weekly measure of retail activity will report on sales for the second fiscal week of May, ended May 14. For the first fiscal week of May, sales were up 2.5% vs. the same period in April. For the full month of April, sales were off by 3.9% compared with the full month of March.

PRODUCER PRICE INDEX

Tuesday, May 17, 8:30 a.m. EDT

Producer prices for finished goods sold by U.S. businesses probably ticked higher in April. The median estimate among economists surveyed by Action Economics is for a 0.4% gain. In March, the price index charged ahead by 0.7%, on a 5.3% surge in gasoline prices. In February, producer prices rose 0.4%, with a 1.4% increase in overall energy costs. Based on the April consensus forecast, producer prices would be 4.6% higher than a year ago, following a yearly pace of 4.9% in March, and 4.7% in February.

Excluding food and energy costs, core prices probably increased by 0.2%. In both March and February, core producer prices edged up 0.1%, after a 0.8% surge in January. Based on the Action Economics survey, core producer prices would be up by 2.6% from the same period a year ago for a second straight month.

Inflationary pressures from crude materials, the most basic materials used to make goods, are not as strong. In March, crude material prices were up 10.8% from a year ago, and just 3.3% when the effects of food and energy are stripped. That's considerably lower than the yearly pace of 25.5% in November of 2004 for all crude materials.

NEW RESIDENTIAL CONSTRUCTION

Tuesday, May 17, 8:30 a.m. EDT

Housing starts probably rebounded in April. The annual rate for the month is expected to be 1.98 million, say economists surveyed by Action Economics. In March, housing starts retreated to an annual rate of 1.84 million, after surging to 2.23 million in February. The February result was the strongest yearly pace since February of 1984. The housing market may be getting another near-term boost with improved weather and a recent backslide in mortgage rates.

INDUSTRIAL PRODUCTION

Tuesday, May 17, 9:15 a.m. EDT

U.S. industrial production is expected to have increased 0.2% during April. That's the median estimate of economists surveyed by Action Economics. The March index increased 0.3%. The March result was driven by a 3.6% jump in utility output following two monthly declines. Manufacturing production was off 0.1% in March but the easing was due to a 3.6% plunge in auto and parts output. A repeat performance in April looks unlikely, but the April labor report did show further easing in factory payrolls and average weekly hours worked. Those employment numbers play a role in the Federal Reserve's calculation of factory output. Industrial production rose 0.2% in February but was unchanged in January.

The average operating rate for all industries probably nudged up to 79.5%, from 79.4% in March, and 79.3% in February. Among manufacturing, capacity utilization is steadily rising.

MEETINGS OF NOTE

Wednesday, May 18, 12 p.m. EDT

U.S. Treasury Secretary John Snow gives a luncheon speech at the American Iron and Steel Institute's General Meeting in Washington, D.C.

3:30 p.m. EDT

U.S. Government Accounting Office director David M. Walker speaks about U.S. fiscal policy at a Market News International seminar in Washington, D.C.

EARNINGS REPORTS

Wednesday, May 18, 7 a.m. EDT

Intuit, and more.

MORTGAGE APPLICATIONS

Wednesday, May 18, 7 a.m. EDT

The Mortgage Bankers Association releases its tally of mortgage applications for both home buying and refinancing for the week ending May 13. For the week ended May 6, the purchase index hit a record high of 526.2, after edging up to 482.5 in the previous week, from 482 in the week ended Apr. 22. The four-week moving average rose to 489.4, from 476.4 for the week ended Apr. 29.

The average rate on a conventional 30-year mortgage, according to HSH Associates, fell a little more. In the week ended May 6, the rate eased to 5.89%, from 5.91% for the week ended Apr. 29.

The MBA's refi index also improved. In the period of May 6, the index hit 2263.3, from 2061.2 during the week ended Apr. 29, from 2052.5 for the week ended Apr. 22. The four-week moving average jumped to 2061.8, from 1970.8 in the week ended Apr. 29.

CONSUMER PRICE INDEX

Wednesday, May 18, 8:30 a.m. EDT

Consumer prices for all goods and services are forecast to have grown 0.4% during April. That's the consensus among economists queried by Action Economics. For the month of March, consumer prices increased 0.6% on a 4% jump in energy prices. The index rose 0.4% in February and 0.1% in January. The forecasted April gain would put the yearly rate of inflation at 3.3%, after rising to 3.1% in March and 3% in February.

There are positive data for the U.S. energy market heading into the peak driving season. According to the Energy Dept., total gasoline inventories at this time of year are at the highest level since 2002. Crude oil inventories are also quite comfortable at this juncture. Unless demand is unexpectedly strong or supply issues emerge, the sticker shock of summer gasoline prices may be subdued.

Excluding the volatile energy and food categories, consumer prices probably grew by 0.2%. In March, the core consumer price index rose 0.4%, after a 0.3% gain in February and four straight monthly gains of 0.2%. The seasonally adjusted yearly rate of core inflation for April would hold at 2.3%, after running at a rate of 2.3% in March.

REAL EARNINGS

Wednesday, May 18, 8:30 a.m. EDT

Inflation-adjusted weekly earnings of production workers probably rose 0.5% in April. The Labor Dept.'s employment report showed a 0.9% rise in weekly earnings during the period, while economists expect a 0.4% increase in the April consumer price index. March inflation-adjusted earnings fell 0.3% for a second straight period, after 0.2% gains in both December and January. Compared with the same period a year ago, March inflation-adjusted earnings were off by 0.5%, after a 0.7% yearly decline in February.

MEETINGS OF NOTE

Thursday, May 19, 8:20 a.m. EDT

Federal Reserve Bank of Atlanta President Jack Guynn gives the welcoming remarks at an Atlanta Fed conference entitled, "Housing, Mortgage Finance and the Macroeconomy," in Atlanta.

8:25 a.m. EDT

Federal Reserve Board Chairman Alan Greenspan speaks via satellite at the Atlanta Fed's conference entitled, "Housing, Mortgage Finance and the Macroeconomy."

8:30 a.m. EDT

Federal Reserve Board Governor Susan Schmidt Bies makes introductory remarks at the Boston Fed's conference on operational risk.

9:30 a.m. EDT

Federal Reserve Board Governor Mark Olson gives a keynote address at the Chicago Fed's payments conference entitled "Innovations, Incentives and Regulation: Forces Shaping the Payments Environment."

9:30 a.m. EDT

U.S. Securities and Exchange Commission Chairman William Donaldson testifies before the Senate Banking Committee in Washington, D.C.

EARNINGS REPORTS

Autodesk, Gap, and more.

JOBLESS CLAIMS

Thursday, May 19, 8:30 a.m. EDT

First-time claims for jobless benefits for the week ended May 14 most likely dipped to 330,000. Jobless claims moved up for a third straight week, to 340,000 during the week of May 7. In the previous period, claims rose to an upwardly revised 336,000, from 321,000 during the week of Apr. 23.

The four-week moving average edged up to 324,000, from 322,000 during the prior week, and 323,000 in the week ended Apr. 23. In the week ended Apr. 30, continuing jobless claims grew to 2.6 million, from 2.58 million.

LEADING INDICATORS

Thursday, May 19, 10 a.m. EDT

The Conference Board's composite index of leading economic indicators is expected to have fallen by 0.2% in April. That's the consensus among economists surveyed by Action Economics. The March index dipped 0.4%, after inching up 0.1% in February, following a 0.3% fall in January. On a yearly basis, the March index was down 0.5% compared with the same period a year ago. The yearly decline in March was the first since April of 2003.

PHILADELPHIA FED SURVEY

Thursday, May 19, 12 p.m. EDT

The Philadelphia Federal Reserve Bank will issue its May survey of business conditions for the mid-Atlantic region. Economists queried by Action Economics are forecasting a retreat to 19.3, after bouncing up to 25.3 in April, from 11.4 in March.

The index tracking new orders improved to 20.3, the best since December of 2004. At the same time, the unfilled orders index came in at -3.8, the sixth negative result in the past seven months. The trend indicates that manufacturers in the region are catching up with demand and an eventual slowdown in the shipments index would be a likely next step. The push to increase production led to increased hiring and longer workweeks in April.

Respondents' outlook for the coming six months edged down to 27.5, from 29.8 in March, but remained above the February and January readings. The outlook for both new orders and unfilled orders eased a little as well.

MEETINGS OF NOTE

Friday, May 20, 8:30 a.m. EDT

Federal Reserve Bank of Boston President Cathy Minehan makes opening remarks on the third and final day of the Boston Fed's conference on operational risk. By Jim Cooper


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